ARK Invest’s marquee ETF, ARK Innovation (ARKK), dropped to 103.98 Monday, its lowest close all year. It’s now down more than 16% just in 2021. And much of the pain is due to 11 of its holdings, such as health care plays Editas Medicine (EDIT) and Syros Pharmaceuticals (SYRS) plus tech Materialise (MTLS), which lost more than a third of their value in 2021 so far.
Talk about a reversal of fortunes. ARK Innovation was the hottest thing going last year. Money poured into the ETFs managed by Wood’s company. ARK Innovation jumped 148.7% in 2020. But for now the direction is down, and fast.
ARK Invest Singed By Health Care
It’s hard to pinpoint the exact point of pain for ARK. It’s not simply a matter of just a few struggling stocks.
Of the 52 stocks in the ARK Innovation ETF that traded all year, 45 are down this year so far. And not by a little either. The stocks that have traded the full year are down an average of 15.4% so far this year.
But above all, ARK’s big bets on small health care plays continue to hurt. Nine of the 15 worst performing stocks in the ARK Innovation portfolio are all in the health care sector. And it’s not due to problems with the sector. The Health Care Select Sector SPDR ETF (XLV), which tracks big companies in the S&P 500’s health care sector, is up 9.5% this year.
That’s what makes stocks like Editas Medicine all the more painful. Shares of the genome editing company are down a crushing 55% this year alone. It’s the largest percentage drop of any stock in the ARK Innovation portfolio. That’s after Editas jumped more than 130% in 2020. Fortunately for ARK, the holding is a small one at just 0.9% in ARK Innovation.
50% Hits From ARK Holdings
Take Syros Pharmaceuticals. The biotech working on cancer treatments is down a crushing 53.5%, just this year. Analysts think the company will lose $1.57 a share in 2021 and $1.86 in 2022. It lost $1.82 a share in 2020. It’s a small position for ARK Innovation at just 0.1% of the portfolio.
And then there’s Materialise, a Belgian company known for making products used in 3D printing. Shares are off more than 53% this year.
Big Holdings Hurt, Too
Massive stock drops wouldn’t hurt the ETF’s value as much if they were only limited to small positions. The trouble, though, is some big ARK Innovation holdings are plunging too.
Tesla (TSLA), the ETF’s No. 1 holding with an 11% weight, is usually the S&P 500 bedrock in the fund. But this year, it’s dropping like a stone. Shares of Tesla are down more than 10% this year, putting it squarely in correction territory.
Pain With S&P 500 Holdings, Too
Tesla isn’t the only S&P 500 position failing to offer ARK Innovation some ballast when it needs it.
IBD Long Term Leader watchlist member Synopsys (SNPS), a company that works in the computer-chip design industry, is down more than 10% this year. Roughly 1% of ARK Innovation’s portfolio is in Synopsys.
And Twitter (TWTR), a sort of S&P 500 leader among social media stocks, is down 4% this year. That’s actually a smaller loss than in most other ARK Innovation positions. But it’s not offering much help as it’s only a 1.3% position for the fund.
Wood is a longtime, skilled money manager. And she plays for the long term. But it’s an adjustment for many people who piled into the ETF last year to find out it can actually go down, too.
Biggest Holes In ARK Invest
Top holdings in ARK Innovation ETF down the most this year
|Company||Symbol||Weight||YTD % Ch.||Sector|
|Editas Medicine||(EDIT)||0.87%||-55.0%||Health Care|
|Syros Pharmaceuticals||(SYRS)||0.1||-53.5%||Health Care|
|Berkeley Lights||(BLI)||0.61||-48.3%||Health Care|
|Unity Software||(U)||2.81||-46.8%||Information Technology|
|Iovance Biotherapeutics||(IOVA)||1.51||-42.9%||Health Care|
|CRISPR Therapeutics||(CRSP)||2.49||-33.5%||Health Care|